Judge orders return of seized strip club papers

Jace Radke and Dan Kulin

Friday, July 18, 2003 | 9:27 a.m.

Federal agents might have to testify at an Aug. 13 court hearing on allegations they reviewed privileged legal documents obtained during a raid on the Crazy Horse Too, a Las Vegas topless club owned by Rick Rizzolo.

U.S. Magistrate Peggy Leen on Thursday ordered the agents' participation in the pending evidentiary hearing, and also told the federal prosecutor to return by today files on four active civil cases taken from the club during the Feb. 20 raid.

Leen initially ordered the return of the files on Thursday, but extended the deadline after Assistant U.S. Attorney Eric Johnson requested additional time so he could appeal the order to return the files.

During a hearing before Leen on Thursday, attorneys for the club accused the government of reviewing and holding onto documents protected by attorney-client privilege in violation of Leen's March 6 order.

The attorneys also said the government's handling of credit card receipts has the club facing the prospect of losing its ability to take credit cards. Credit card transactions account for about $1 million in business every month, said Anthony Sgro, an attorney for the club.

Federal agents seized credit card receipts, along with other documents, during a search of the club as part of an investigation into alleged ties between the club and organized crime. The search warrant was signed by Leen.

The credit card receipts are available to the club now. But previously had been sent to Quantico, Va., for analysis, a step that made the receipts unavailable for about five weeks, Sgro said. Without access to the receipts during that time, club staff were unable to verify contested credit card charges, which hurt the club's status with the company that runs the credit card transaction machines, he said.

Sgro said that on Wednesday the club received a letter from the company, called Nova, informing the club that its account will be terminated Aug. 11.

The club probably could have easily set up a new account with a different company before the raid, but under the current circumstances that might be more difficult, Sgro said.

Sgro said he was very happy with Leen's order, even though she delayed a decision on whether or not to hold the two FBI agents in contempt of court for not revealing at a March 6 hearing that the documents had been reviewed.

"The FBI agents who handled or reviewed potential attorney-client documents will have to testify," Sgro said. "The hearing will determine whether they are in contempt or made misrepresentations."

Sgro has also said that Rizzolo's Sixth Amendment rights were violated.

The federal government has not conceded that documents taken from the club during the February raid were protected as confidential legal documents.

Crazy Horse personnel have had access to seized materials to make copies, and just because a file contains attorney correspondence or memoranda does not mean it is privileged, according to court documents filed by Johnson.